The Legal and Ethical Environment of Business 8-1.
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Transcript of The Legal and Ethical Environment of Business 8-1.
The Legal and Ethical Environment of Business
8-1
Chapter 8The Property System
8-2
Learning Objectives
• Distinguish between personal property and real property
• Understand classifications of property
• Examine methods of acquisition of personal property
• Understand the concept of bailment, and the legal duties associated with bailment
8-3
Learning Objectives
• Understand the concept of real property
• Examine methods of acquisition of real property
• Understand different interests in real property, including ownership interests and scope of interests
• Examine the landlord-tenant relationship
8-4
Introduction
• Property: Tangible and intangible items that can be owned
• Ownership: The right to possess, and the right to exclude others from use or possession
• Legal person: A human being or entity, such as a corporation or government, that is recognized as a possessor of certain legal rights
• Beneficiary: A person or entity that receives the benefit of a contract, trust, or other legal instrument
• Trust: A legal instrument created for the benefit of a beneficiary
8-5
Personal Property
• Property can be classified as real or personal
• Real property: Land, and certain things that are attached to it or associated with it
– Real estate: A term that refers to real property
– Estate: A term that refers to ownership interests
• Virtual stores are not forms of real property
• To know more about nonreal property boom, check the below links:
– http://realestate.msn.com/article.aspx?cp-documentid=13107800
– http://secondlife.com/land 8-6
Personal Property
• Personal property: Property that is not real property
• Tangible property: Something that can be touched
• Chattel: Moveable, tangible personal property
• Fungible: Property that is not uniquely identifiable and is subject to easy mutual substitution
8-7
Personal Property
• Personal property can be intangible
– It does not physically exist, but it is still subject to ownership principles, including acquisition, transfer, and sale
– Examples:
• The right to payment under a contract
• The right to exclude others from a patented product
• The right to prohibit others from using copyrighted materials
8-8
Personal Property
• Fixture: Something that used to be personal property but has become attached to the land so that it is legally a part of the land
• Property can be classified by ownership
• Personal property and real property can be private or public
– Private property: Property owned by someone or something that is not the government
– Public property: Property that is owned by the government
8-9
Methods of Acquisition of Personal Property
• Ownership by production
– Production: A method of acquisition of personal property ownership, which involves creating the property
– Uniform Commercial Code (UCC): A model statute that seeks to provide uniformity to contracts law among the different states
• It is not a law until state legislatures adopt it as law
– Purchase: A method of acquisition of personal property for ownership, involving trade of valuable consideration
8-10
Methods of Acquisition of Personal Property
• Property may be gifted
– Gift: A voluntary transfer of property
– Donor: A person who gifts property
– Donee: A person who receives gifted property
• Conditional gift - Gift that requires a condition to be met before the gift will transfer
8-11
Methods of Acquisition of Personal Property
• Property that someone finds can be classified in many ways
– Abandoned property: A category of personal property in which the owner has intentionally relinquished the property
– Lost property: A category of personal property where the property has been unintentionally relinquished by its owners
8-12
Methods of Acquisition of Personal Property
– Mislaid property: A category of personal property where the property has been placed by the owner for the owner’s later retrieval, but the owner has forgotten where it is
– If the finder refuses to return lost or mislaid property to its rightful owner, the owner can sue for conversion, which is a tort
• Conversion: Intentional, substantial interference with the chattel of another
– Treasure trove: A category of found property consisting of money or precious metals
8-13
Bailment
• An arrangement in which the rightful possessor of personal property gives the property to someone who has agreed to hold the property and who has a duty to return it
• Bailor: Someone who is in the rightful possession of property who gives the property to someone else to hold
• Bailee: Someone who is in the possession of someone else’s property, and who agrees to accept the property and has a duty to return it
8-14
Bailment
• Duties of the bailee to the bailor
– Taking reasonable care of the property
– Gross negligence: Reckless disregard of a duty (in bailment)
• An involuntary bailment is created when someone finds lost or mislaid property
• A voluntary bailment is created when intention exists to create the bailment
• Disclaim: To renounce
8-15
Methods of Acquisition of Real Property
• Land, and certain things that are attached to it or associated with it
• Real property may be purchased, inherited, gifted, or even acquired through adverse possession
• Ownership rights are transferred by title
– Title: The ownership rights in property
• Nuisance: A tort in which the tortfeasor unreasonably interferes with the use and quiet enjoyment of the plaintiff’s real property
8-16
Methods of Acquisition of Real Property
• Most common way that real property is acquired is through purchase
– Purchase: A method of acquisition of real property for ownership, involving trade of valuable consideration
• Deed: A writing that conveys title to real property
• Statute of Frauds: A statute that requires certain types of contracts to be in writing to be enforceable
8-17
Methods of Acquisition of Real Property
• Quitclaim deed - Conveys whatever interests in title that the grantor has in the property to the party to whom the quitclaim is given
• Warranty deed: Conveys title and a warranty against defects in title as well as encumbrances
• After title is transferred by the deed, the deed is typically recorded
8-18
Methods of Acquisition of Real Property
• Race statute: A state statutory scheme that recognizes superior rights in real property to the party who records the interest in the property first
• Notice statute: A state statutory scheme that recognizes superior rights in real property to the party who acquired the interest first without notice of other claims
8-19
Methods of Acquisition of Real Property
• Race/Notice system: A combination of race statute and notice statute concepts, where priority is given to the first bona fide purchaser on record when there is a conflicting claim to ownership
• Bona fide purchaser: A purchaser who takes title in good faith, with no knowledge of competing claims to title
8-20
Methods of Acquisition of Real Property
• Another common way in which real property is obtained is through inheritance
– Real property may be bequeathed through a will or may transfer per state statutes when a decedent dies intestate
– Escheat: When the state gains ownership of property when there is no owner, such as when a decedent has property but no heirs
• Real property may be acquired through a gift
– Gift: A voluntary transfer of property
8-21
Methods of Acquisition of Real Property
• A less common way to acquire real property is through the doctrine of adverse possession
– Adverse possession: A method of acquiring ownership of the real property of another, which requires several elements to be met
– The possessor must be in actual possession
– The possession must be open and notorious
– The possession must be hostile
8-22
Methods of Acquisition of Real Property
– The possession must be continuous
– The possession must be exclusive
– The state statutory length of time must be met
• If all of these are met, then the possessor can bring a claim to quiet title
– Quiet title: A civil action used to determine title to real property
• Ouster: The actual or constructive eviction of a lawful tenant
8-23
Interests and Scope
• Each buyer of real property has a duty to exercise due diligence when purchasing land
– Due diligence: A duty of care imposed on prospective buyers of real property to exercise reasonable judgment or prudence to inspect property for defects
• Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA): A federal statute commonly known as “Superfund,” which identifies and cleans up toxic waste sites
8-24
Duties of Landowners
• Landowners owe different duties to different types of people who enter their land
• Responsibilities vary, depending on whether the person is a trespasser, a licensee, or an invitee
– Trespasser: Person who voluntarily, intentionally enters the land of another without permission or privilege
– Licensee: Person who has permission to be on the land
– Invitee: Person who has entered real property by invitation
8-25
Ownership Interests in Real Property
• Fee simple absolute: A form of ownership in real property in which the owner has absolute ownership, subject to legal restrictions on usage (e.g., zoning)
• Fee simple defeasible: A form of ownership based on a condition or restriction, the violation of which can result in loss of ownership– Reversion interest: A future interest in real property
8-26
Ownership Interests in Real Property
• Life estate: A possessory interest in real property measured by the life of the person who has the life interest (grantee)
• Reverse mortgage: A type of mortgage that enables the seller of real property to realize the equity in the property while retaining possession until death, in exchange for ownership interest
8-27
Ownership Interests in Real Property
• Tenancy in common: An ownership interest in which all owners have an undivided interest in the property, equal rights of possession, and a devisable interest
– Devisable: An ownership interest that may be transferred upon death
• Joint tenancy: An ownership interest in which the surviving owner has the right of survivorship
– Right of survivorship: The power of a successor to acquire ownership interest in property upon the death of a joint tenant
8-28
Ownership Interests in Real Property
• Tenancy by the entirety: A type of joint tenancy that can only occur between a husband and wife
– Partition: A method of dividing real property
8-29
Scope of Interests in Real Property
• Scope of ownership matters, because it is determinative of what can or cannot be done with the land
• Subsurface or mineral rights: Rights beneath the actual surface of land, including rights to the minerals found there
• Riparian water rights doctrine: A right of a property owner adjacent to a water source to use the water and a duty to share that waterway with other property owners adjacent to the water
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Scope of Interests in Real Property
• Prior appropriation doctrine: A water allocation scheme that grants the rights to water to the first who uses the water
• Easement: A nonpossessory interest in real property
• Covenant: A voluntary restriction on the owner’s use of land
• Run with the land: Means that restrictions on real property will apply to subsequent owners of the real property
8-31
Landlord-Tenant Relationships
• Leasehold interest: A possessory interest in real property
• Tenant: A possessory ownership or leasehold interest in land
• Landlord: The owner of real property who leases the possessory interest to a tenant
• Lease agreement: A contract for the possessory interest in land
• Evict: To remove a possessor from land
8-32
Landlord-Tenant Relationships
• Tenancy for years: A tenancy that lasts for a particular, specified period of time
• Periodic tenancy: A tenancy that simply runs for a particular period of time and then automatically renews if it is not terminated by the landlord or the tenant
• Tenancy at will: A tenancy for no particular fixed period of time and subject to termination at will by either the landlord or the tenant
8-33
Landlord-Tenant Relationships
• Tenancy at sufferance: A tenancy that occurs when a tenant remains on the property after the right of possession has ended and without the landlord’s consent
• Assignment: The ability to transfer rights conveyed by a contract to another party
• Restriction on assignment: A clause that prohibits parties from transferring the rights conveyed by a contract to another party
8-34